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What is Electronic Clearing Service (ECS) in banking?

Electronic clearing service or ECS is an electronic mode of payment for recurring transactions. It is used by various financial and non-financial institutions for payment or collection of interest, dividends, EMI’s, SIP’s, etc. When it is used for payments, it is known as ‘ECS Credit’ and when used for collecting amount from us, it is known as ‘ECS Debit’. The primary advantage having ECS is that huge amounts can be transferred from one bank account to another.

How does ECS Credit work?

To avail the ECS credit option, you first need to submit the beneficiary name, address, bank account details, date of credit, etc to the institution whom you are interacting with. The institution will then work with your bank to credit the interest, dividend, etc to your account accordingly. Here, you would be giving ECS mandate to the institution to avail this ECS facility.

The institution should communicate with you on the ECS credit details. Banks would also show up this information in their account statements. Few banks also send email and sms alerts on these transactions.

What are the benefits for you?

Saving a lot of time by not visiting the bank.

Eliminating fraud transactions.

You will receive the funds on the right date.

Cost efficient.

Are there any limits and processing charges for this?

There is no such limit on these transactions. Though source banks are required to pay 25 paise per transaction to the clearing house, the transactions will be absolutely free of charge to you.

ECS debit works similar to ECS credit with the only difference being that here the amount would be deducted from your account and transferred to the institution. You need to submit all the required details to the institution who will work with your bank to deduct the amount from your account on specified date. You would also receive intimations as in case of ECS credit.

What are the advantages of ECS debit?

Cutting down visits to banks and thus saving time and energy.

Not worrying about missing out on due dates for payments.

Cost effective.

Can you stop the ECS debit instructions?

Yes, you can give mandate to the dealing institution to stop the ECS debit which is in process. However, you need to give these instructions well in advance to avoid any last minute issues.

Any limits or charges?

Like ECS credit, ECS debit also does not hold any limits for individual transactions. Charges paid by originating bank to clearing house and destination bank are 25 paise and 50 paise. However, destination banks do not charge any amount from the customers.

ECS Credit and ECS Debit are wonderful facilities initiated by RBI for the benefit of customers. Though these transactions are smooth, at times they could be cancelled due to some technical issues. Hence, it is advised that you keep checking these transactions from time to time. Also make sure that you have enough funds in the account to avoid fines and penalties as in the case of cheque bounce.